updated 09:41 am EDT, Wed June 11, 2014

Presences in Ireland, Netherlands, and Luxembourg suspect

As was hinted yesterday, the European Commission has announced a formal investigation of Apple, Fiat, and Starbucks for possible tax evasion. In particular the probe will concentrate on Apple's affiliates in Ireland, Starbucks' footprint in the Netherlands, and Fiat Finance and Trade in Luxembourg. "In the current context of tight public budgets, it is particularly important that large multinationals pay their fair share of taxes," states Joaquín Almunia, the Commission's VP for competition policy. "Under the EU's state aid rules, national authorities cannot take measures allowing certain companies to pay less tax than they should if the tax rules of the Member State were applied in a fair and non-discriminatory way."

Apple, like a number of corporations, is known to use loopholes in Irish tax laws to pay little on the international income it funnels through the country. The Commission is set to scrutinize rulings from Irish regulators on the taxable profit of Apple's two local firms, Apple Sales International and Apple Operations Europe.

When the US Senate looked into Apple's foreign tax practices last year, it noted that the company was paying a rate of less than 2 percent on $74 billion in non-US income by shuttling it through Ireland. Apple has insisted that its operations are legal, but it hasn't been fully investigated in the European Union so far; if the Commission determines that rules were broken, Apple may choose to relocate to another place it can use as a tax haven.